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Africa: You Electrify Her, You Blockchain Her, You Buy Her

16 October 2018 17:30, UTC
Daria Piotrovskaya

Today and in the future, leadership in the energy sector means geopolitical and technological leadership either. It is always sunny on the black continent, but its struggle for a place under the sun in the political arena is just beginning. “In Africa, there is a growing interest in technology, and it is attractive to Fintech and the blockchain companies,” the recruitment and partnership manager for West Africa at African blockchain initiative Wuntia Osman GOMDA shared the opinion with Bitnewstoday.com. – But a 2016 report by Afrobarometer states that “96 per cent of Nigerians are connected [to a power supply], but only 18 per cent of those connections work “most of the time” or “always. This illustrates one of the problems associated with operating a tech industry in West Africa, as the current infrastructure may not be able to sustain the industry.”

This point of view is shared by a partner of the venture company on the blockchain Olaoluwa SAMUEL-BIYI from Nigeria: “Electricity is a problem for us, energy-intensive cryptocurrency operations are not sustainable in our markets. However, there are cryptocurrencies that do not involve continuous mining, and they can take root in us despite these difficulties.”

According to the World Bank, more than 600 million people in the continent live without electricity. Those who have it, constantly face interruptions in networks. The cost of connecting to thermal power plants in some parts of Africa is twice as high as in developed countries. Electricity demand outstrips supply. Even in South Africa, the government is not in time with decisions to modernize the energy sector. And in unstable regions, with low solvency of consumers and prosperous corruption, the situation is even worse.

From blockchain to electricity, from electricity to blockchain

The inhabitants of the continent succeed to solve the problem of electricity, even locally, thanks to digital technology. Both local and foreign startups are actively implementing projects related to the blockchain and renewable energy sources. The forerunners of energy democracy - smart-contract and DLT-technologies facilitate calculations between suppliers and consumers and allow you to sell excess electricity for cryptocurrency. In addition, they help to save money: people can buy solar panels not entirely, but purchase their cells only. In fact, we are talking about creating your own energy system, independent of the state.

All over the world, economic sectors are seeking to get away from centralized systems, and the blockchain seems to be the best solution. If Africa wants to achieve technological advances, there is a must implement it, experts say. Blockchain and its numerous functionalities allow reducing the level of corruption on the black continent, diminishing the energy deficit, and increasing the level of trust in the government of most African countries.

African pie

Investments in the energy sector of Africa are now in a trend - this applies to traditional projects and Fintech environment. This is a developing market, a tasty morsel for investors. So far, compared to the USA, Europe, Asia, the threshold for entry into the African market is low. And if at its development to focus on promising technologies, one-time investments in Africa can pay off many times over.

The International Energy Agency (IEA) has prepared a forecast for the development of the world economy, according to which the cost of a unit of energy for solar batteries will drop by 30-50% by 2040, and the price of the batteries themselves will fall by 50%. The share of renewable sources in generation will increase from 12% to 24%, and in consumption - from 14% to 19%. According to a report from the International Renewable Energy Agency (IRENA), the average cost of wind and solar energy will decrease by 26-59% by 2025.

The lack of energy and the rapidly deteriorating environment due to the use of high-carbon fuels is a global problem. And DLT projects based on green energy promise to solve it. The potential of Sudan or Libya alone accounts for 40% of the global electricity consumption. According to the forecasts of the International Electric Agency, by 2030 the share of solar energy in Africa could reach more than 70 GW. In 2017, this figure was about 2.5 GW. In other words, Africa is the most suitable place in the world for experiments with solar energy, and many are eager to participate in the section of the African energy pie.

Light on credit

Africa’s ties with China are widening stronger. Let's look at how the amount of loans provided by Chinese authorities to African countries is growing. At the Forum for Cooperation in Africa (FOCAC) in 2006, they amounted to $5 billion, in 2009 - $10 billion, in 2012 - $20 billion, and in 2015 - already $60 billion. According to a report from Oil Change International, China was the largest provider of public finance for the development of the energy industry on the black continent from 2014 to 2016. Most of the funds went to the extraction of oil and gas (72%), followed by coal and hydropower.

From 2000 to 2016, the amount of loans issued by China to African countries amounted to $124 billion. Some countries, including South Africa, Zambia, Kenya, Angola, Nigeria, Congo, Sudan, and Ethiopia, were in a debt trap. But China continues to increase its influence in Africa, which, in turn, seeks to fill the voids in the most important areas of development as quickly as possible.

What does China want, giving loans to the continent possessing 50% of world gold reserves, 90% of cobalt and platinum, 98% of chromium, 64% of manganese, more than 30% of uranium, virgin forests, oil and diamond deposits, 40% of world reserves of hydropower? Obviously, the situation suits it completely, because the black continent pays its debts with resources. A bonus to them is inexpensive labor. According to UN forecasts, about 2.5 billion people will live in Africa by 2050. The World Bank predicts that Africa’s GDP will grow by 2.7% this year.

The example of China turned out to be infectious: other countries are striving to become benefactors of Africa. In recent decades, France has been persistently trying to disown the image of the colonialist, while strengthening its position on the black continent. Ex-president Francois HOLLAND promised full electrification of the continent by 2020, believing that meeting the demand for electricity for 15% of the world's population will help stabilize the migration situation on the planet. Emmanuel MACRON continued the line, arguing that Europe could not succeed without a black continent.

At the UN Climate Conference in 2016, France launched an initiative for the development of renewable energy on the black continent, announcing that it had found lenders willing to allocate $10 billion by 2020. The French president also announced the decision of the European Union to create an aid fund for Africa of up to $46.3 billion (€40 billion), funds from which can also be used "in the future to provide Africans with access to electricity." However, we could not find the results of the French programs for the electrification of Africa.

They are actively investing in the energy sector of Africa and lending it to Japan, Germany, Korea and even the World Bank. Historically, Africa is a hostage to the interests of others and its mentality. As we see, the black continent readily goes on unfavorable conditions in order to solve urgent tasks. And the numbers say that this is a progressive situation. On the other hand, right now, Africa has an opportunity to separate itself from creditors thanks to the blockchain, which opens up additional opportunities in the energy sector and not only. Will Africa be able to grow its own political will and stop being a donor for world powers, becoming their competitor?

According to Grey JABESI, chief visual officer at director of a cryptoexchange in Cape Town, “Africa is becoming a good business environment because its infrastructure is developing. For digital technology there are difficulties associated with the legislation. We need our governments to understand this as soon as possible and start putting together legal frameworks to remove unnecessary friction for those who want to build products using DLT. Our governments need to be aware of the need to create a legal framework for those who want to create products using the DLT. Good products are important that will solve people's problems in everyday life.”